Europa Plus Sca Sif and Another v Anthracite Investments (ireland) Plc

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeThe Hon. Mr Justice Popplewell
Judgment Date03 Mar 2016
Neutral Citation[2016] EWHC 437 (Comm)
Docket NumberCase No: CL-2014-000173

[2016] EWHC 437 (Comm)




Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL


The Hon. Mr Justice Popplewell

Case No: CL-2014-000173


(1) Europa Plus Sca Sif
(2) Anthracite Balanced Company (R-26) Limited
Anthracite Investments (ireland) Plc

Jasbir Dhillon Q.C. (instructed by Sidley Austin LLP) for the 1 st Claimant

Geoffrey Kuehne (instructed by Trowers & Hamlins LLP) for the 2 nd Claimant

Simon Salzedo Q.C. (instructed by Reed Smith LLP) for the Defendant

Hearing dates: 25 & 26 January 2016

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Hon. Mr Justice Popplewell The Hon. Mr Justice Popplewell



Europa Plus SCA SIF ("Europa") is an open ended investment company incorporated in Luxembourg. In these actions Europa and, contingently, Anthracite Balanced Company (R-26) Ltd ("Balco"), which is beneficially owned by Europa, claim €1.3 million from Anthracite Investments (Ireland) PLC ("AII"). AII counterclaims €1.6 million from Europa.


The amounts represent two payments received by AII on 7 July 2008 as partial redemption of investments in hedge funds managed by an Italian company, Duemme Hedge SGR S.P.A ("Duemme Hedge") pursuant to a series of transaction documents entered into as part of a structured note offering. Under the terms of the transaction documents, the sums ought then to have been paid by AII to Balco, but were overlooked. The transactions were unwound by an agreement dated 16 March 2012 ("the Termination Agreement"). The current dispute turns mainly on whether AII is bound to pay the two sums to Europa under paragraph 14 of the Termination Agreement as payments received "in respect of Duemme Shares". AII contends that Duemme Shares means only the shares then held by AII which were being transferred to Europa by the Termination Agreement; and that the 2008 payments fall outside the scope of the provision because they were redemptions of shares previously held by Duemme Hedge in funds which no longer existed and were not the subject matter of the transfer. AII paid the €1.6 million to Europa, but not the €1.3 million, in May 2014. AII now seeks repayment of that sum on the basis that it was made in the mistaken belief that AII was liable under paragraph 14. Europa and Balco contend that in paragraph 14 the expression Duemme Shares includes all shares previously held in Duemme hedge funds pursuant to the note, and so includes the two July 2008 payments; alternatively that a term to like effect is to be implied. Balco contends that if the sums are not payable to Europa under paragraph 14, they remain owing to Balco under the transaction documents. In response to this contingent claim, AII argues that any such liability to Balco under the transaction documents was extinguished by paragraph 8 of the Termination Agreement.

The background to the Termination Agreement


In 2003 Lehman Brothers International (Europe) arranged a note issue programme of US$10 billion. In the form registered in 2007 under Irish financial services regulation, it provided for a series of notes to be issued by AII which might be listed on the Irish Stock Exchange or other identified markets.



AII was incorporated in the Republic of Ireland as a public limited company in 2003. It is administered by AIB International Financial Services Ltd. At the time of the events in dispute it had two directors, Mr Bergin and Mr Geary.


AII is a special purpose vehicle established by Lehman Brothers for the purposes of the note programme, and what is described as an "orphaned" company, that is to say one which is not intended to have any commercial shareholders with an economic interest. Its authorised share capital is registered in the name of share trustees, and by nominees who hold their shares on trust for the share trustees. The share trustees are charitable trusts which are required to apply any income derived by them from AII solely for charitable purposes. The share trustees covenanted not to dispose of or deal with the shares of AII, and they have no beneficial interest in the shareholding other than their entitlement to fees for acting as share trustees.


Under the terms of a trust deed as amended and restated on 12 January 2007 ("the Trust Deed") AII covenanted with HSBC Trustee (C.I.) Ltd, who would act as trustee for the noteholders ("the Trustee"), that for so long as any of the notes were outstanding, it would not have any employees or subsidiaries; it would not trade or conduct commercial operations, save for entering into the agreements relating to the note programme and carrying out its obligations under that programme and related agreements; it would hold no assets other than the security with respect to each series of notes which it issued, the benefit of other agreements relating to each series, the sum of €40,000 representing its share capital, and fees generated in connection with the issue of each series of notes; and it would not issue any shares or make any distributions to its shareholders save for a dividend of up to €500 per series under the note programme; nor could it have any interest in a bank account save for its administration and management costs and for the holding of amounts charged to the Trustee pursuant to the notes. The registration document and Trust Deed also made clear that the notes would provide for limited recourse against AII by noteholders, such that any noteholder would be able to enforce only by reference to the property on which its particular series of notes was secured, or its proceeds.


The purpose of this structure was to protect each set of noteholders from the potentially adverse consequences of AII participating in multiple issues. Each set of noteholders was not to have recourse to assets which AII was holding as security under different notes; and AII was to be made "bankruptcy remote", as required by credit agencies for the purposes of rating the notes, so that one set of noteholders could not disrupt the efficacy of AII's participation in the other notes by insolvency proceedings.


AII was therefore a vehicle which, as Mr Salzedo QC accurately put it, was intended to operate not for the benefit of its shareholders but for the benefit of the noteholders.

The transaction documents


The current dispute has its origins in the issue of notes which were Series 26 in the note programme, on the terms of an amended and restated offering circular dated 31 January 2008 ("the Notes"). The Notes were 100% subscribed to by Fondazione Enasarco, an Italian pension fund provider, to invest €780.47m in a portfolio of assets managed by Lehman Brothers Asset Management Ltd, comprising funds of hedge funds (80%) and long only traditional mutual funds (20%).


The maturity of the Notes was 14 June 2023. Under their terms, Enasarco was entitled to give instructions for a change in the composition of the fund investments, including realisations, subject to certain guidelines, for so long as it remained the sole Noteholder.


The structure of the Notes was that they were not issued by AII, but by a Cayman Island incorporated special purpose vehicle, Anthracite Rated Investments (Cayman) Limited ("ARIC"). ARIC was to receive the proceeds of Enasarco's investment in the Notes and transfer them to a wholly owned subsidiary, Balco, in return for the issue of preference shares.


Balco was another Cayman Island special purpose vehicle established by Lehman Brothers. Balco was to make the investments in the underlying funds. The three directors of Balco were employees of HSBC Financial Services (Cayman) Ltd ("HSBC Cayman"), which was appointed as the Administrative Agent, Share Trustee and Corporate Administrator. Balco's banker was HSBC Bank Plc ("HSBC London"), which was appointed Issuing and Paying Agent and Custodian.


The portfolio included, amongst other things, shares in two hedge funds managed by Duemme Hedge, namely (1) Duemme Multi-Strategy Series 2 Fund ("the Series 2 Fund") and (2) Duemme Hedge Protection Fund ("the Old HP Fund"). Together these shares comprised 24.57% of the part of the portfolio invested in hedge funds. So far as these investments were concerned, Balco could not invest directly in the Duemme funds because it did not come within the qualifying investor status so as to be eligible for tax exemption on the operating profit. AII, however, did. Accordingly these investments were achieved by two total return swaps (one for each of the two Duemme funds), dated 31 January 2008 and 29 February 2008 ("the Swaps"), pursuant to an ISDA Master Agreement, and a supplemental trust deed dated 31 January 2008 ("the Supplemental Trust Deed").


The purpose and effect of the Swaps was that AII made the investments in the Duemme fund shares for the economic benefit of Balco. Under their terms, Balco was to pay AII at the outset the amount needed for AII to invest in the relevant Duemme fund shares; Balco was to be paid by AII at term (14 June 2023) by AII arranging for redemption of the relevant Duemme fund shares; prior to term, Balco was entitled in certain circumstances (including an instruction from Enasarco) to require AII to arrange for some or all of the relevant Duemme fund shares to be realised with the redemption proceeds being paid by AII to Balco.


The Supplemental Trust Deed secured Balco's rights under the Swaps. The Duemme fund...

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